Apac countries ‘less transparent’ since pandemic

China continues to be the least transparent major sourcing market

Vietnam, Thailand, Indonesia, India and China have all become less transparent since the pandemic,  according to a new report.

China continues to be the least transparent major sourcing market. Just 38% of all audits undertaken in the second half of 2022 were an accurate representation of factory conditions. In India, just over half of all audits were transparent.

Auditors from the Supply Chain ESG Risk Ratings report, published by Elevate, have been unable to access accurate information and make conclusions from site visits. 

This decline in transparency relative to pre-pandemic levels has complicated the ability of companies to govern higher risk levels, with suppliers in 50 sourcing geographies less transparent than in the previous year.

As a result it is predicted less robust audit programs in 2023 will lead to further declines in audit transparency.

A contributing factor to declining levels of transparency has been audit deception: a situation in which suppliers intentionally withhold information or provide falsified data to auditors. This may include coaching employees for interviews or other attempts at concealing malpractices.

While countries such as China and India have historically exhibited lower levels of transparency, the pandemic complicated the ability of auditors to accurately assess the factory conditions and instances of audit deception as access to sites were complicated. 

Poor access to production sites led responsible sourcing managers to switch instead to audit protocols such as remote audits, desktop assessments and self-assessment questionnaires, each of which preclude auditors from assessing audit deception and offer lower degree of rigor. 

This led to lower levels of transparency in even regions that have historically been more transparent like Vietnam, Thailand, and Indonesia.

 JP Stevenson, director of customer success for ESG Analytics at LRQA, said: “Transparency is key for supply chain audits. Deception and sharing of falsified data not only render risk assessments ineffective but also means that serious violations can go unidentified.

“To build resilient supply chains, being able to see, manage and mitigate risk exposure is essential. Through responsible sourcing programs and insightful data, businesses can partner with suppliers that can meet the sourcing requirements that include critical ESG performance.”

The report, published by sustainability specialists Elevate, an LRQA company, is grounded in 20,000 global supplier audits conducted annually, with more than 45 million data points derived from on-the-ground site visits collated in Elevate’s data analytics solution, EiQ.

Its data found nearly half of sourcing countries are now considered ‘high risk’. 

This means the country is more likely to experience risk events that stand in violation of supply chain ESG governance frameworks, including local and international law. 

These could range from finding evidence of environmental degradation to the use of child labour.